So earlier this morning Spark Capital partner Bijan Sabet and I got into a major conversation over Twitter via direct messages. Let’s just say it was a rather frank exchange of opinions and arguments on Yahoo (s yhoo) and its decision to go nuclear on Facebook and by extension crossing a line. Bijan, like many industry insiders such as Fred Wilson and Brad Feld, who have both written about the Yahoo-Facebook fight, is a thoughtful guy and his arguments were well reasoned.
Now I am the first one to beat up on Yahoo. In recent past I have beaten on Yahoo worse than a farmer taking a cane to an obstinate donkey. So even though the knives are out for Yahoo (hi Sarah), I for one am willing to listen and look for alternative theories on Yahoo and why it sued Facebook. As I wrote/reported yesterday that there is a lot of angst over how Facebook jacked Yahoo’s address book within Yahoo.
Yahoo behaving badly, two explanations
In addition, I have two theories, both on the assumption that Yahoo is actually not seeking money from Facebook, but instead has alternative/ulterior motives.
- Yahoo is looking to renegotiate its 2009 deal to integrate Facebook Connect and extend it by, say, five years at terms that are favorable to Yahoo. The previous deal was not quite what Yahoo had hoped for. Sounds a little far fetched? But it is totally plausible that in two months we will see both companies announce undying love for each other and have a public kumbayah moment.
- The second theory is somewhat simpler. Yahoo is actually looking to show to the world (aka real patent trolls) the true value of its massive patent portfolio. I am betting, the company wants to get rid of as many of patents and get as much money as possible for them. Selling those patents can be lucrative. A few billion here and a few billion there, and suddenly CEO Scott Thompson is sitting on a pile of cash he desperately needs to distract Wall Street. Of course, no better way than showing your patent muscles than going after Silicon Valley’s holiest cows of the moment: Facebook.
Patent sales would be part of what seems to be a house-cleaning strategy. In yet another internal memo (that nosey Kara Swisher and her sources), Thompson is saying a whole lot of changes are coming at the old Yahoo.
1) Focusing intently on those parts of the business that have a competitive advantage.
2) Liberating all of us to work faster and make better decisions.
3) Thinking really creatively about how to build new businesses that leverage our trusted relationships with users.
Translation – I am getting ready to jettison a whole lot of business units and maximize return on all our assets, so get ready to pack your bags, because you might be going with those businesses. Apparently the company is already shopping its ad-tech businesses.
Getting old is hard
My argument with Bijan was that Yahoo is 17 years old and that is a long time in Internet years. It has missed two major shifts – social and mobile – and it doesn’t have much choice but to basically go down the path it has chosen. Patent lawsuits and the eventual sale of that portfolio are just part of going down that road for Yahoo.
Of course, many would argue that if Apple (s aapl) had that fatalistic attitude, it would have meant no Apple, no iMac, no iPod, no iPhone and no iPad. Yes that is true. But when Steve Jobs took over Apple, they had three months left and they took a bet. It paid off. What if it hadn’t!? Past history aside, there was a crucial difference – Steve Jobs, who was a one-of-a-kind leader and who made Apple a one-of-a-kind company.
The Apple Defense
Yahoo is not Apple. Hell, even Google (s goog) is not Apple. So, no, we cannot use the Apple resurgence as a case study of a comeback. It is hard to find a resurgence story in technology. Sun Microsystems? Dead! Digital Equipment? Dead. Dell, trying but not sure where they are going! Motorola? It is run by Google – enough said. IBM (s imb) – perhaps, but they changed businesses and approach to what they did. And again, Lou Gerstner (look him up kids) was one-of-a-kind CEO.
So back to Yahoo suing Facebook: it is too early in the “game” and more details are only going to follow. So Bijan, Fred and Brad, if you want to sweat about something, then worry about a reality where Intellectual Ventures owns most of Yahoo’s patent portfolio.